'Cut your tax credits, squeeze your
living standards, get rid of some of the services on which you rely, and
put up VAT. That's where the money is coming from for the millionaires'
tax cut.'

Osborne defied critics in cutting the 50p rate, arguing it showed Britain's his commitment to
business and an enterprise economy. Even at 45p, the top rate will remain above the 40p that persisted through all but the very last months of Labour's reign.

The 50p rate was introduced by Labour
in 2010 for those earning more than £150,000 a year, but the Coalition claimed that it was bringing in hundreds of millions of pounds - rather
than billions - for the Treasury. Until then the top rate had been at
40p since 1988.

In return for supporting the measure
the Lib Dems wanted a large increase in the annual income tax personal
allowance - the amount of income you can receive each year free from tax
- and the other biggest Budget giveaway was a substantial boost to
this.

A higher level of £8,105 started as planned for the 2012-2013 tax year (last April), but was ramped up to £9,205 for 2013-2014.

The Government estimated about 23million people would enjoy a gain averaging £170 a year.

However, that benefit will be snatched back for many higher earners because the level at
which 40 per cent tax kicks in will be lower. From April 2013 it will
apply from a total income of £41,450 rather than £42,475. The combined
effect is to leave existing higher-rate payers about £42 a year better
off, but about one million more people will be dragged into the 40 per
cent band.

Those earning above £100,000 continue to have their personal allowance restricted and will end up on average £185 worse off.